To Address Its Housing Shortage, Paris Cracks Down on Pied-à-Terre Rentals

Many foreign owners in Paris use their apartments only part of the year, renting them out to short-term tenants for the rest. Credit
Benoit Tessier/Reuters

PARIS — Many people buy a pied-à-terre in Paris to use for a few weeks a year and to rent the rest of the time. Most of them don’t realize, however, that they are breaking the law. Now, the city government is trying to address the problem with a more direct approach to enforcement.

Mayor Bertrand Delanoë ordered an agency last year to warn property owners that renting out residential apartments for less than a year at a time violated French law. The move was intended to address the lack of affordable housing in the city center. Those who ignored the warning, he said, would be prosecuted.

Only about 25 letters have been sent since enforcement began last autumn — most of them in response to complaints made by neighbors. And only a handful of those cases have gone to court.

But the rental industry in this most-visited city in the world is concerned and, as more owners slowly become aware of the issue, confusion is growing. A few have pulled their properties off the market, others have deleted addresses or other identifying details from Internet listings. And dozens of rental agencies have banded together to try to save their lucrative business.

There is no precise tally of how many of the 1.3 million residences in Paris are being used for short-term rentals. Industry professionals estimate there may be tens of thousands, with a significant proportion owned by foreigners who bought them as vacation homes or investment properties. (Those buyers are predominantly Americans, Italians and Britons, according to brokers.)

Those in the industry also say they believe that the numbers have risen sharply in the last 10 years as the Internet has made it easier to find potential renters.

To legally offer short-term rentals, owners would need to have their residential properties reclassified as commercial sites, a complicated process that involves finding a commercial property in the same neighborhood that can be transformed into residential use.

“It isn’t difficult; it is impossible,” said Fabrice Luzu, a notary who has helped many international clients invest in city real estate. “The owner must apply for a special permit and there is very little chance he would obtain it.”

Without such a permit, any apartment classified as residential in a French city of more than 200,000 must be offered with a minimum one-year lease. The law, passed in 2005, has some exceptions for student housing.

For landlords in Paris, the difference in income can be substantial. Depending on how it is renovated, a 650-square-foot apartment in the chic Saint-Germain-des-Prés area, for example, could be rented furnished for 2,500 euros ($3,100) a week, Ms. Hollands said.

She estimates that the yearly income, based on the flat being rented about 70 percent of the time, would bring triple the amount of a long-term lease.

She added, “Unfurnished, on a long lease, it would rent between 2,200 euros and 2,500 euros a month” or at most, 30,000 euros a year.

The police are charged with enforcing the law, but rarely do. So last year, after several attempts, Paris succeeded in transferring enforcement within the city to the mayor’s housing agency, the Bureau de la Protection des Locaux d’Habitation, or the office for the protection of residential property.

“We decided to apply the law in a strict manner,” said Franck Affortit, the agency’s assistant director. “Letters have been sent to owners, who include many Italians, some Americans and British and French.”

Most of those owners have taken their properties off the rental market, while “several” others who have not are being prosecuted, Mr. Affortit said.

One case has resulted in a preliminary judgment in favor of the city; court dates for the other cases have not yet been set, Mr. Affortit said.

Conviction could result in a fine of as much as 25,000 euros. Continued violation could result in additional fines of as much as 1,000 euros a square meter a day. Still, he admits that given his small staff of five, tracking down violators “is a problem.”

Therefore, he said, “we are going to apply this in an intelligent manner.”

The main target, he said, are owners who are “making these rentals into a permanent activity, diverting residential property from its essential function as housing for Parisians,” Mr. Affortit said. “Someone who rents once a year” will not be prosecuted.

Still, the uncertainty has unnerved many in the industry.

Ms. Hollands of Vingt Paris wrote about the crackdown in a November 2009 newsletter to her clients. “I was lambasted by other agents for writing about it,” she said. “But I felt a moral obligation to inform my owners and investors who were about to spend a million euros without knowing about this.”

Her company has served mainly North American and British clientele for the last seven years.

In May, one of her customers “who had done an exquisite restoration received a letter because the neighbors complained,” she said. “They had been renting out the apartment by the week since March and had bookings through the summer. And they were paying a lot of attention not to cause a disturbance.”

About 35 rental agencies recently formed the Association des Professionnels de la Location Meublée, a group of professionals in the furnished rental industry, with the goal of finding a way to operate within the city’s regulations.

The association questions the city’s interpretation of the law and its premise that properties forced off the short-term rental market will become long-term prospects for Paris residents.

Its first step was to commission “a serious study of the market to show what it represents, and to demonstrate that furnished rentals for periods less than 12 months correspond to a social and economic need for a city like Paris,” said the group’s president, Jean-Marc Agnes. “Clearly, it is not just about three-day stays by tourists, but includes professors, research scholars and exchanges of businessmen in international companies who may come for several months.”

The group expects to have the results in September.

In the meantime, the effort does not seem to have hurt property sales in Paris, whose market has been one of the most robust in Europe throughout the recent global real estate downturn.

“I don’t see prices going down to fulfill Mr. Delanoë’s wish to have cheaper apartments for Parisians,” said Mr. Luzu, the notary. Whether it be wealthy Americans, Brazilians, Indians or Chinese, “they all want a pied-à-terre in Paris,” he said.

The American designer and developer Alon Kasha has been alerting his clients to the potential problem, although many of them do not rent their properties.

“If they are doing this for a rental income, it’s too fraught with problems,” he said. “I tell them, ‘Rather, buy a warehouse somewhere and rent it out,’ ” he said.

“But if they’re buying because they have a passion for a Paris apartment, that’s different. I say, ‘If you can rent it and it works out, that’s fine, but don’t count on it.’ ”

A version of this article appears in print on July 7, 2010, on page B5 of the New York edition with the headline: To Address Its Housing Shortage, Paris Cracks Down on Pied-à-Terre Rentals. Order Reprints|Today's Paper|Subscribe